Taking Advantage of Mutual Funds

Goddy Egene writes that the opportunities for investors to invest through mutual funds have increased with the recent listing of three funds by Coronation Assets Management on the Nigerian bourse

Investing in equities is very lucrative considering the fact that it offers very high returns. It is equally very risky because just as you can record high returns, you can also lose money if you make the wrong choice of stocks. For instance, last week, a stock appreciated by 21 per cent. This is quite attractive and enticing. But if you are not careful in the choice of stocks you can easily get your fingers burnt. Similarly, for investors who are highly risk averse but need stable returns, investing in fixed income securities is attractive. But a wrong selection of fixed income securities could make an investor to miss target returns on investments. One of the best ways to maintain steady returns and reduce risks in equities and fixed investments is diversification.

This allows an investor to spread risk across asset classes. The best way to do this, according to investment experts is through mutual funds also known as collective investment schemes (CIS). By definition, mutual funds are collective/pooled investment vehicles that allow you (an investor) with limited resources to own a diversified investment portfolio managed by a seasoned investment manager.
They are highly recommended for retail and high networth and institutional investors because of the numerous benefits mutual funds provide. There are many mutual funds already in market that are registered and regulated by the Securities and Exchange Commission (SEC).

Reasons to patronise mutual funds
There are many reasons why investors should patronise mutual funds. Although some investors are aware of the benefits investing though mutual funds, they stay away and prefer direct investment because of the loss they suffered in the past due to weak regulatory environment and experiences with fund managers. But the environment has improved, compared to years back.

According to the President, Fund Managers Association of Nigeria (FMAN), the umbrella body for trade group of fund managers in the country, Dr. Ore Sokefun, the situation has changed significantly given the efforts by SEC and operators to reposition and develop the industry.
“In recent past we do admit that some fund managers were not abiding by the ethics of the profession. But now FMAN, being a self-regulatory organisation and SEC making sure that everybody is filing their returns and looking at things more correctly, we believe that now you can definitely entrust your money to SEC-registered fund managers. The mistake a lot of investor make is that they do not ensure that who they give their money to is registered by SEC.

She said while investors want to invest and make good returns, they do not have the time to do the research themselves or to stay abreast of the market.
According to her, it is better for investors to go through a mutual funds, stressing, “you will have a professional, a fund manager who looks at the fund every day and stays abreast of the information that will either move the market either positively or negatively and react to it.”

Enter Coronation Mutual funds
More opportunities to invest through mutual funds were opened recently when Coronation Asset Management Limited, a subsidiary of Coronation Merchant Bank Limited, listed three mutual funds on the Nigerian Stock Exchange (NSE) for trading and accessibility by retail and institutional investors. The funds are: Coronation Balanced Fund, Coronation Money Market Fund and Coronation Fixed Income Fund.

Speaking during the listing ceremony in Lagos, Chairman of Coronation Asset Management and Managing Director, Coronation Merchant Bank Group, Abubakar Jimoh, said the listing of the funds was “yet another milestone in the history of our company and validation of our expertise in asset management.”

According to him, listing the N2.168 billion raised from the three funds on the stock exchange is a demonstration to investors that the company is determined and committed to offer better prospects on their investments across all market conditions. Jimoh said the company has answers to issues such as active engagement, efficient management of their funds, and quality reporting of mutual fund performance.

He added: “We have developed a technology base that supports efficient and seamless service, as well as promote transparent and real time reporting of portfolio holding and performances. We believe in building a sustainable relationship based on trust with our clients by ensuring we deliver on our promise of achieving their financial goals as well as committing to quality and excellent service.”
Furthermore, Jimoh explained that they recommend investing in the mutual fund, which fits best with investor’s long term savings goal and tolerance for risk.

For example, the asset managers would recommend an investment in the Money Market Fund to an investor who has a short-term investment requirement and is also apprehensive towards taking risk.
Also speaking on the funds, a Director of Coronation Asset Management, Mr. Aigbovbioise Aig-Imoukhuede, said: “These funds will guarantee investors’ competitive yields as the business has put together a strong investment management team who will be guided by an investment committee with over 50years combined experience to ensure the funds deliver on the expectations of investors.”

According to him, while the Coronation Money Market Fund offers investors the opportunity to maximise return on their liquid savings, the Coronation Fixed Income and Balanced Funds provide the best opportunity to realise medium to long term investment goals.

Specifically, the funds offer all categories of investors, three viable options in line with domestic economic and financial market conditions, an opportunity to diversify their investment portfolios while relying on the experience and performance track record of the Coronation Brand to ensure their investments attain their required financial outcome.

Coronation Fixed Income Fund: The aim of the Fixed Income Funds is to provide regular and steady income which is payable on a semi-annual basis. The fund will invest in a diverse pool of fixed income securities such as FGN bonds, State Bonds, sub-national bonds, corporate bonds, and money market securities. Though capital appreciation in the fixed income funds may be limited, the risks are typically lower than that of equity biased funds. The fund is more suitable for investors looking to invest for the medium to long term. The return benchmark is to outperform the average return of the FMDQ OTC Securities Exchange bond index. This fund is ideal for medium to long-term focused investors.

Coronation Money Market Fund: The Money Market Fund aims to provide for preservation of capital and moderate income, and will make regular income payment on a quarterly basis. The fund will invest in safe short-term instruments such as treasury bills, certificates of deposit, commercial paper (CP) and inter-bank call money, and will be optimally managed to generate competitive returns in line with the interest rates prevailing in the market. The return benchmark is to outperform the average yield of the 90 days treasury bills. This fund is ideal for short term focused investors. Interestingly, Coronation Money Market Fund provides group personal accident insurance cover for investments above N100,000.

Coronation Balanced Fund: The aim of the balanced fund is to achieve capital appreciation over time while mitigating volatility associated with investments in equities by investing in fixed income securities. The fund will provide a combination of income and moderate growth by investing in a diverse pool of equities, and fixed income securities such as FGN bonds, state bonds, sub-national bonds, corporate bonds, and money market securities. The fund is more suitable for investors looking to invest for the longer term. The return benchmark is to outperform the composite average return of the 90-day treasury bill and Nigeria Stock Exchange 30 Index. This fund is ideal for medium-term focused investors with a relatively higher appetite for risk.

Speaking on the funds, Senior Fund Manager and Head, Coronation Asset Management, Mr. Emeka Okolo Okolo said the three funds offer investors more opportunities to enjoy good returns on their investments, assuring that the company has the capacity to ensure investors achieve their objectives.

Okolo said: “No one can doubt the capacity and expertise of Coronation Asset Management to deliver competitive returns to investors in the Coronation mutual funds. The level of professionalism and quality of investments will be difficult to match by other mutual fund managers in Nigeria and the West African sub-region. This, coupled with the proposed investment mix and the fund structures, distinguish these mutual funds.”
According to him, the Coronation funds are suitable for individual and institutional investors seeking to invest for capital preservation, capital gains and regular income, regardless of their investment time horizon as the funds provide immediate liquidity to fund cash requirements.

The Coronation Asset Management said that in addition to maintaining a mandate to deliver excellent and efficient services under an ever changing economic environment, it has a diverse team of experienced investment managers, who create innovative financial solutions which are easily accessible to investors.
The firm explained that, a subsidiary of Coronation Merchant Bank Group, it provides investment solutions to help their clients achieve their financial goals.

“Target clients include retail and high net worth individuals, corporations, state or federal government entities, insurance companies, amongst others,” it said.
On the other hand, the parent company, Coronation Merchant Bank, is an emerging merchant banking franchise with industry leading financial stability indicators and an “A+” rating from Agusto & Co. The credit rating is a valid testament to the bank’s strong capitalisation, good liquidity profile and robust risk management framework evidenced by the zero NPL ratio as at December 2016.

“The banking group was established to fill the gap in a long-underserved market segment, seeking to address the need for long term capital across key sectors of the economy. The Group offers investment and corporate banking, private banking/wealth management and global markets/treasury services to its diverse clients. Driven by its vision of becoming Africa’s premier investment bank and with an asset base of over N100billion, the banking group is certain to leverage its privileged direction by some of Nigeria’s individuals who excelled and rose to the top of merchant banking sector at its height of excellence to become the industry model for risk management, corporate governance and responsible business practices,” it said.